China's Savers Ignore Efforts to Cool $3 Trillion WMP Market

China’s savers are turning a deaf ear to government warnings about one of their favorite investments. Individuals hold nearly 90 percent of instruments known as wealth management products, a record share, because many believe they’re shielded from losses -- a view officials have tried hard to discourage, Bloomberg News reported. The assumption of safety has been buttressed by the fact that the large banks that issue WMPs have at times dipped into their own balance sheets to protect investors from losses or even outright defaults. That retail buyers have kept piling into WMPs even as corporate investors and financial institutions pared their exposure presents a quandary for Chinese policy makers preoccupied with controlling risks. While they want to stress that WMPs aren’t immune from losses to curb moral hazard, they must also avoid sparking a stampede for the exit among China’s millions of yield-hungry savers. Read more

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